A spot bitcoin exchange-traded fund (ETF) approval in the U.S. has the potential to bring in a significant amount of new capital to the cryptocurrency market. Glassnode, a blockchain data firm, has conducted an analysis on the subject and provided insights into how spot bitcoin ETFs could reshape market demand and supply, marking a new era for bitcoin's integration into mainstream financial markets.
Glassnode: Spot Bitcoin ETF Could Be a Catalyst for Major Demand and Increase Volatility
According to Glassnode's report published on November 20, the approval of a spot bitcoin ETF could result in an influx of demand and potentially amplify volatility due to the relatively limited supply of bitcoin (BTC). The study highlights the significant pent-up demand for a spot bitcoin ETF product.
Based on their analysis, Glassnode researchers estimate that up to $70.5 billion could enter the market from stock, bond, and gold investors who allocate only a fraction of their assets. Even conservative projections suggest that tens of billions could flow into the market within the first few years.
A spot ETF, unlike existing bitcoin investment vehicles, would offer institutions direct and regulated exposure to bitcoin. This could attract substantial inflows, even if some capital shifts from current proxy funds. Historical data indicates that new access to assets often leads to increased demand.
"To understand the market dynamics that will likely unfold post-ETF introduction, we now need to turn our attention to bitcoin's available supply," explains Glassnode's study.
The analysis points out that prolonged accumulation has resulted in a tightening of BTC's circulating supply. Over 76% of bitcoin is now held long-term, which concentrates coins in the hands of holders who are less responsive to price fluctuations. Glassnode's research also shows that short-term and active trader supplies have recently reached multi-year lows.
There is a clear growth in illiquid supply as investors move their assets into holding wallets. On the other hand, exchange balances reflect the opposite trend, indicating limited market liquidity despite increasing trading volumes. Glassnode's research suggests that despite institutional interest, the supply of tradable bitcoin remains limited.
Glassnode's B2B contributor, Marcin Miłosierny, states that even modest spot ETF inflows could have a significant impact on prices. The sensitivity can be gauged by analyzing bitcoin's realized market cap. When small inflows result in large valuation changes, the potential market impact is high. The report states:
The impact of the first spot bitcoin ETF goes beyond the symbolic. It also represents a potentially significant influx of new demand. With the prevailing long-term HODLing pattern exacerbating bitcoin's scarcity, the introduction of an ETF could dramatically shift the market dynamics.
Glassnode concludes that the approval of a spot bitcoin ETF is a pivotal moment for institutional involvement. However, the subsequent changes in supply and demand could significantly increase market volatility. "By keeping an eye on the shifts between these two cohorts, traders and investors can better navigate the complex landscape of Bitcoin onchain," the report concludes.
What are your thoughts on Glassnode's report regarding a spot bitcoin ETF? Feel free to share your opinions and insights in the comments section below.
Frequently Asked Questions
Should You Get Gold?
In times past, gold was considered a safe haven for investors in times of economic trouble. Many people are shifting away from traditional investments like bonds or stocks to instead look toward precious metals such gold.
Gold prices have been on an upward trend over recent years, but they remain relatively low compared to other commodities such as oil and silver.
Some experts believe that this could change very soon. They believe gold prices could increase dramatically if there is another global financial crises.
They also note that gold is increasingly popular because of its perceived intrinsic value and potential return.
These are some things you should consider when considering gold investing.
- Before you start saving money for retirement, think about whether you really need it. You can save for retirement and not invest your savings in gold. Gold does offer an extra layer of protection for those who reach retirement age.
- You should also be aware of what you are getting into before you buy gold. There are many types of gold IRA accounts. Each offer varying degrees of security and flexibility.
- Remember that gold is not as safe as a bank account. It is possible to lose your gold coins.
If you are thinking of buying gold, do your research. If you already have gold, make sure you protect it.
Should You Invest Gold in Retirement?
It depends on how much you have saved and if gold was available at the time you started saving. If you're unsure about which option to choose then consider investing in both.
In addition to being a safe investment, gold also offers potential returns. Retirement investors will find gold a worthy investment.
Most investments have fixed returns, but gold's volatility is what makes it unique. Therefore, its value is subject to change over time.
This does not mean you shouldn’t invest in gold. It is important to consider the fluctuations when planning your portfolio.
Another benefit of gold is that it's a tangible asset. Unlike stocks and bonds, gold is easier to store. It can also be carried.
You can always access gold as long your place it safe. You don't have to pay storage fees for physical gold.
Investing in gold can help protect against inflation. Gold prices are likely to rise with other commodities so it is a good way of protecting against rising costs.
You'll also benefit from having a portion of your savings invested in something that isn't going down in value. Gold usually rises when stocks fall.
Gold investment has another advantage: You can sell it anytime. You can easily liquidate your investment, just as with stocks. You don't even need to wait for your retirement.
If you do decide to invest in gold, make sure to diversify your holdings. You shouldn't try to put all of your eggs into one basket.
You shouldn't buy too little at once. Begin by buying a few grams. Add more as you're able.
It's not about getting rich fast. It's not to get rich quickly, but to accumulate enough wealth to no longer need Social Security benefits.
Gold may not be the most attractive investment, but it could be a great complement to any retirement strategy.
What is the tax on gold in an IRA
The tax on the sale of gold is based on its fair market value when sold. When you purchase gold, you don't have to pay any taxes. It's not considered income. If you sell it later you will have a taxable profit if the price goes down.
Gold can be used as collateral for loans. Lenders seek to get the best return when you borrow against your assets. For gold, this means selling it. It's not guaranteed that the lender will do it. They may keep it. They may decide to resell it. You lose potential profits in either case.
So to avoid losing money, you should only lend against your gold if you plan to use it as collateral. Otherwise, it's better to leave it alone.
Statistics
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- Gold is considered a collectible, and profits from a sale are taxed at a maximum rate of 28 percent. (aarp.org)
- If you accidentally make an improper transaction, the IRS will disallow it and count it as a withdrawal, so you would owe income tax on the item's value and, if you are younger than 59 ½, an additional 10% early withdrawal penalty. (forbes.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
External Links
irs.gov
cftc.gov
law.cornell.edu
- 7 U.S. Code SS7 – Designation boards of trade as contract market authorities
- 26 U.S. Code SS 408 – Individual retirement account
wsj.com
- Saddam Hussein's InvasionHelped Uncage a Bear In 90 – WSJ
- Want to Keep Gold in Your IRA at Home? It's Not Exactly Legal – WSJ
How To
How to hold physical gold in an IRA
The best way to invest in Gold is by purchasing shares of companies that produce it. However, this method comes with many risks because there's no guarantee that these companies will continue to survive. There is always the chance of them losing their money due to fluctuations of the gold price.
The alternative is to buy physical gold. This means that you will need to open an account at a bank, bullion seller online, or purchase gold from a trusted seller. This option has many advantages, including the ease of access (you don’t have to deal with stock markets) and the ability of making purchases at low prices. It's also easy to see how many gold you have. You'll get a receipt showing exactly what you paid, so you'll know if any taxes were missed. You are also less likely to be robbed than investing in stocks.
However, there are disadvantages. Bank interest rates and investment funds won't help you. You won't have the ability to diversify your holdings; you will be stuck with what you purchased. Finally, tax man may want to ask where you put your gold.
BullionVault.com has more information about how to buy gold in an IRA.
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By: Jamie Redman
Title: Glassnode Analysis Reveals Spot Bitcoin ETF Approval Could Unleash $70B Capital Influx
Sourced From: news.bitcoin.com/glassnode-analysis-reveals-spot-bitcoin-etf-approval-could-unleash-70b-capital-influx/
Published Date: Thu, 23 Nov 2023 23:30:49 +0000
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